Healthcare

Scrubs that fit well. Scrubs that flatter your body. Scrubs with antimicrobial fabric, to stop bacteria and infections from spreading. The medical apparel industry is a $10 billion industry in the US alone—so where have scrubs like these been?

That’s what Trina Spear asked herself, and her answer was FIGS, which she calls the “highest quality medical apparel in the world.” FIGS has the potential to turn the medical apparel industry upside down. As she explains: “it’s a commoditized industry that we are de-commoditizing. It’s an unbranded industry that we are branding.”

Listen to Karl and Trina talk about why FIGS is a B-Corp that gives away a set of scrubs to a healthcare provider in need for every set they sell. And just how many meetings it took for Trina to raise their first $2 million in funding. (Spoiler: about 100. Which Karl points out is totally normal, for you entrepreneurs out there who are feeling discouraged about heading out to meeting #43.)

What’s a guy supposed to do when he sells his first startup to Google for over $80 million, just 2 years after graduation?

Found another company, Flatiron Health (which has so far raised $228 million from, among others, Google Ventures) that is working to cure cancer using big data.

This is the life story, so far, of Nat Turner W’08. Listen to hear him talk with Karl Ulrich about choosing your funding strategically (“taking investment is much more than just capital”), the benefits of being an industry outsider (“I think, honestly, it’s an advantage that we did not come from the industry”), rising healthcare costs (“maybe this crisis, maybe this opportunity will actually give rise to some innovative thinking and some better solutions. We can all be hopeful for that.”), and more.

Erica Jain and Cavan Klinsky received an award from theM&T Innovation Fundto help found their company, Healthie. Here’s what their startup is doing:

Registered dietitians and nutritionists play an incredibly important role in the US Healthcare system, and have been shown to have a sustainable, clinically effective impact on the health of American adults. Today, over 65% of American adults are overweight or obese, but fewer than 5% have regular access to a regular dietitian.

John Smithwick WG’01 has been working on his digital health care venture for almost five years—enough time for his company, RoundingWell, to transform into something far more than the patient readmission avoidance tool he originally planned.

Editor’s note: This post was previously published on the Wharton Magazine blog.

Sally Poblete WG’00 has been at the intersection of health care and entrepreneurship her entire career. For a while, though, the ratio had been more to the health care side. But she always knew she would get back to entrepreneurship. Now she has.

Fever Smart is a smart thermometerthat allows parents to monitor their child’s temperature continuously and remotely. It’s already FDA approved, and their Indiegogo campaign this fall reached its goal in just 4 days, and ultimately raised $62,986—157% of their $40,000 goal. The great press that Fever Smart got in CNET,Business Insider, VentureBeat, and more undoubtedly helped.

Editor’s note: This article was originally published in the Wharton Journal.

This article is a part of a special series on the Wharton Business Plan Competition (WPBC). Today, we talk to Matt Tanzer (W’02, WG’12), Chief Commercial Officer of RightCare Solutions. RightCare Solutions was started by three Wharton founders and took first place in the 2012 WBPC.

Matthew Tanzer (W’02,WG’12)

Wharton Journal: What was the inspiration behind starting RightCare?

MT: Have you ever had a family member or friend get sick, go to the hospital, and then spend the next weeks or months bouncing in and out on a seemingly endless rotation of hospital visits? I’m no stranger to this situation either, and it was heartbreaking to see my loved ones suffer when they were readmitted mere days or weeks after their original discharge. Every year millions of Americans become trapped in this vicious cycle, costing the healthcare system billions of dollars. Hospitals need tools to identify these high-risk patients proactively and technology that connects providers and patients all along the care continuum. Every patient should get the services they need to have the highest quality outcomes, and RightCare’s built software to deliver on that.

WJ: How did RightCare get its start?

MT: In 2004, Dr. Kathy Bowles, a researcher and professor in the School of Nursing, was investigating the root causes for why older adults were being readmitted to hospitals at alarming rates. One of the researchers on her team, Eric Heil (Eng’05, WG’12), was a senior in the School of Engineering and Applied Sciences. In the seven years apart Kathy turned her research into a cutting-edge predictive modeling tool while Eric built a successful career in venture capital. They reunited at Penn when Eric enrolled in Wharton’s MBA Program for Executives. Recognizing the growing need in the marketplace for software technology that helps clinicians lower readmissions, improve patient outcomes, and reduce health system costs, they formed RightCare Solutions.

WJ: What was the status of RightCare (operationally) when entering into the Wharton Business Plan Competition?

MT: Kathy was awarded roughly $5M of NIH-funding to develop what is now thee core IP of our software. By the time the BPC began, we already had peer-reviewed clinical data underpinning our company. And with the help of our Wharton classmates, who provided frank and brutal assessments of our plan during the early stages, we had a concise pitch deck. We began to line up meetings with potential investors, and had initiated negotiations with Penn on obtaining an exclusive license to commercialize Kathy’s research.

WJ: What did the team decide to do with the awarded funds?

MT: We put the awards towards creating our website and related marketing collateral, exhibiting at conferences on healthcare quality, licensing software development tools, and a host of other activities. On top of the cash award, the in-kind legal and accounting services were huge. There’s nothing more expensive than a cheap lawyer or accountant, and the competition helped us avoid that early pitfall by pairing us up with two prestigious firms in Duane Morris and KPMG.

WJ: Did you know that you would end up working with Eric Heil (Eng’05, WG’12,) and Mrinal Bhasker (WG’12) right away?

MT: For me, RightCare started out as nothing more than class credit. Yet, the more I learned about the havoc that readmissions wreaked on patients, their families, and the healthcare system at large, the stronger my convictions became about RightCare. How it was not only a viable business but was a challenge that I simply had to tackle. Once that belief took hold, the thought of working alongside Eric and Mrinal as professional colleagues was just icing on the cake.

WJ: How did the dynamics and responsibilities of the team stay intact when RightCare started to scale and how has it managed to stay intact?

MT: One of the reasons our team has clicked so well since the beginning is that between the three founding management team members, our skills and experiences are incredibly diverse and complementary. Eric learned as a venture capitalist how to form companies and raise money. Mrinal had built and exited healthcare technology companies in the past, and was most recently the Chief Architect for Maryland’s Health Information Exchange. I had spent the early part of my career focusing on commercial operations and analytics, which have been critical to our company’s early growth. We trust each other, and we hope that foundational value persists as our company scales.

WJ: Tell us about RightCare’s early fundraising experience.

MT: Just because someone is willing to invest in you doesn’t make them the best investor for you. We spent a lot of time at the outset trying to identify investors who do more than just write checks, ones who could also provide mentorship for our management team and open doors to potential customers. Fortunately, in Compass Partners and Domain Associates, we found two such investors.

WJ: On game day, what would be your most valuable advice for those pitching in the competition?

MT: Don’t let the thought of winning or losing overshadow the fact that this competition, in and of itself, is an incredible opportunity. You get tangible, concrete feedback on your written business plan from the successful entrepreneurs who serve as judges. Wharton Communications professors help you refine your message. You pitch in a live-fire pressure situation in front of several hundred people. My advice is to savor this moment and get as much out of the process as you possibly can. And if you’re still not convinced, think about Warby Parker, Baby.com.br, and Graphene Frontiers. None won the BPC, yet all are startup phenoms doing amazing things in their respective industries.

WJ: What are some really important trends in healthcare technology right now?

MT: Two trends come to mind. First, health data is being collected more routinely and in more detail than ever, enabling big data and analytics techniques to become more widespread, especially on the provider side of healthcare. Second, growth in mobile technology has given rise to a variety of consumer engagement apps, telehealth programs, and remote patient monitoring devices that can connect patients to providers along the continuum of care. What gets us really excited is the potential for developing “Coordination Central” care transitions software that combines those two elements: using evidence-based data to guide the right patients to the right interventions, ultimately helping health systems improve patient care, achieve better outcomes, and lower costs.

WJ: What’s next for RightCare?

MT: We’re fortunate to have had two top-tier health system partners right in our backyard in Thomas Jefferson University Hospital and the University of Pennsylvania Health System, both of whom piloted and adopted our software. Having achieved robust readmission reductions at both organizations, we raised a Series B round to scale our commercialization and product development efforts, and are now in active discussions with providers all over the country. Our vision is to provide a software platform that every hospital in America can use to match patients with resources that will result in the highest quality outcomes. And with the support of Wharton and its community of professors and alumni, we’re on our way.

Bio: Izzy Park WG’15 a Vice President of the Wharton Design Club and a regular contributor to the Wharton Journal. Before Wharton, she was part of Deloitte’s Innovation+Growth team and served in the Office of the CTO, bringing new digital products and services to market.

Rollups are a subject near and dear to my heart: I am currently involved in my 3rd rollup over the last 16 years, during which time my business partner, our team, and I have acquired 100 companies. What is unusual about my experience is that all three have been successful (although, as is typical of any business, there have been many sleepless nights along the way).

The basic concept of a rollup makes intellectual sense in that you should be able to take dozens of small businesses and, by combining them into one larger company, operate more efficiently. The efficiencies should come in many ways: increased purchasing power, lower cost of capital, spreading headquarters costs over a larger revenue base, etc. Despite the rationale behind consolidating a fragmented industry, most rollups are unsuccessful, and I thought it might be useful to attempt to identify the reasons for my experience as compared to the many that have failed. I believe the biggest reason for the excessive failure rate of rollups is a misguided big-picture strategy followed by poor execution. In this post I will refer to my current company, ExamWorks Group, Inc., because I think it provides many real life examples of getting it right.

Let me deal with the big strategy issue first. 7 years ago, when my business partner Jim Price and I heard about the characteristics of the independent medical examination (“IME”) business, we got very excited. IME companies examine claimants for insurance companies and other third parties to establish the veracity of workers’ compensation, automobile accident, disability and general liability claims. Here was an industry that serviced some of the largest financial institutions in the world, had annual revenues in the U.S. of approximately $4 billion, had no correlation to the general economy, had above average profit margins, low capital requirements, attractive cash flow, and was comprised of 500-plus small companies with average revenues of $8 million. When we heard all this both of our reactions were: “It’s too good to be true!” and “This is America—why hasn’t someone else tried to consolidate this industry?”

After several months of research verifying the attractive characteristics mentioned above, we also found that, in fact, a couple of others had previously tried to consolidate the IME industry and failed. As we continued our research, the reason became abundantly clear. The IME industry was made up of companies that operated in a localized geographic sphere, meaning a city, state or in a few limited cases, a few states. They had grown their businesses often by building strong relationships within the local claims offices of their insurance company clients or the lawyers that represented them. Additionally, they had built relationships with the doctors who served on their panel and examined the claimants. In many cases, these relationships had existed for in excess of 20 years. The prior two failures looked at this industry as a typical rollup where they tried to centralize these functions and significantly reduce headcounts to shrink overhead. By doing so, they eliminated the heart and soul of these businesses. Over a fairly short period of time, these moves lead to a serious decline in revenues that overcame any reduction in expenses and ultimately necessitated the sale of both these companies at fire sale prices.

When Jim and I understood this, we decided that our big picture strategy should be the opposite. We would buy the best local companies in every market in the U.S. but leave all of that human capital in place. The business was attractive enough that if our strategy worked, we would achieve revenue synergies while still not have to rely on cost cutting to create a successful enterprise. The objective was to offer a national insurer a consistent product anywhere within the footprint of their claims offices with just one point of contact. At the same time, we would emphasize maintaining the same level of service and support on which the local companies had been built.

The second failing of rollups is poor execution. Because we chose integration rather than centralization, we needed to standardize the way all these acquired companies operated in order to fulfill our vision of offering a consistent product to our customers. Consequently, we migrated all the acquired companies to the same operating software platform, accounting and management information system and information security platform to provide better tools to enhance responsiveness and data security on the local level.

Lastly, we focused on the employees. I have always said that in attempting to blend many different privately held subcultures into one cohesive whole, the social and cultural issues are, in many cases, more important than the financial ones. This is particularly important in a service business where there is no machinery, equipment or inventory. In essence, “the assets walk out the door every night”. Keeping the entrepreneurial zeal that made these companies so successful for so long is something we work at every day. We spend a lot of time explaining our vision and sharing our concerns for solving our customers’ problems with our employees on a systematic and regular basis. We encourage our senior management to personally visit each of our major global locations at least once a year and, in many cases, more frequently. Additionally, over the last 16 years and our multiple rollups, we have had a general philosophy of granting stock options to every employee in the company. Making everyone an owner has paid enormous dividends and, we believe, is one of the key elements to our successes.

Well, after a little over 5 years of buying and integrating 40 companies into what is now a global enterprise, the original big picture strategy is coming true. ExamWorks’ consistent service and product offering is becoming more appealing to customers as they attempt to standardize their policies and procedures. For the first time ever in the industry, three major clients have awarded ExamWorks true national relationships. We believe that we are at the beginning of a systemic change in the IME industry from which ExamWorks is uniquely positioned to benefit.

I am clearly biased in my opinion of rollups based on our successful track record. Like every business, there are positive and negatives, but in approximately 5 years we have taken a thesis and created a thriving company with 2200 employees, operating in 4 countries out of 57 offices, scheduling almost 1 million exams for our clients annually, and with an enterprise value in excess of $1.2 billion. To say I am a fan of rollups is an understatement.

Note: This article reflects the personal opinions and experiences of Richard Perlman as an individual entrepreneur and educator and not the opinion of ExamWorks Group, Inc. or its officers, employees or directors.

Bio: Richard Perlman is the Chairman of Compass Partners, LLC, a merchant banking firm he founded in 1995 and the founder and Executive Chairman of ExamWorks Group, Inc (NYSE:EXAM) the global leader in the independent med medical exam industry. During his 40 year career he has acquired over 125 companies in a broad range of industries. He is a 1968 graduate of the Wharton School and received his MBA from The Columbia University School of Business in 1972.